Friday, August 12, 2011

Red, Black, and Green: Why Oil Exploration on Lake Malawi May be a Bad Idea

The new scramble for Africa’s oil can aptly be summed up in the three colors of the Malawian flag, ‘Black, Red and Green’. Oil or ‘Black Gold’ in Africa, makes up about 10% of the world’s proven oil reserves, “Libya's 41.5 billion barrels of oil reserves and Nigeria's 36 billion barrels are both twice the size of China's proven reserves and just under twice the size of US reserves” (AfricatheGoodNews).  The current rush for Africa’s oil is proving to be lucrative for oil company investment.The oil exporting countries of Equatorial Guinea, Angola, Chad, Sudan, Nigeria, Congo Republic and Gabon alone have enjoyed an average GDP growth of 7,4% from 1996-2005. This means that there is plenty of Green money to be made - and green here doesn’t not mean environmentally friendly nor innocent.

It is no wonder then that with the current oil crisis that is on-going in Malawi, Malawians from many sides of the political arena are looking towards oil exploration as a positive solution to the current fuel crisis. Proponents of oil exploration have argued that it will bring prosperity, help improve infrastructure (build schools and hospitals etc…) and more importantly, end the fuel crisis that has been plaguing the country. Opponents of oil exploration are largely citing environmental concerns. Although environmental concerns are important, it is equally imperative that other factors are considered, particularly the political economy. There is need to have further public debate inclusive of social, economic and political concerns so that Malawi does not repeat mistakes made by other African countries that have experienced the ‘curse of oil’. Malawians need to be educated about what becoming an ‘oil producer’ really means so that they can make informed decisions about moving towards becoming an oil producing country. Oil discovery should not be simply seen as the great savior for Malawi’s socio-economic problems. One should not ignore the fact that the discovery of oil (like most mineral resources) in African countries has largely been a curse. Oil prosperity in Africa has been limited to a select few individuals and large oil companies. Studies have shown that in almost all countries where oil has been discovered in Africa, the average standard of living of the majority has gone down and oil corruption has risen (i.e Chad, Gabon and Nigeria). In Nigeria’s case, we should recall that it was revealed that Shell oil had infiltrated every level of the government in order to exert its influence on that country’s government. The practices of oil companies and their Nigerian counterparts have disrupted good governance in Nigeria, business, and civil life. Its discovery is often viewed as a ‘curse’ for many people in that country – Particularly, to the people that come from the oil producing region.

 Although governments argue that they will undergo the necessary environmental assessments, the reality is that assessments are often rubber stamped in the face of the potential for billions of dollars that oil company’s promise to bring or due to corruption (ie Russia’s Sakhalin project went through environmental impact basement but led to the depletion of fauna due to the corruption within the body charged with overseeing the environment). Even when thorough assessments are done, there are no safety guarantees because pipes often burst due to poor maintenance by oil companies. Oftentimes they use old pipes in African countries or just don’t maintain them due to cost or negligence. Oil spills in Nigeria’s Niger Delta region equivalent to the Gulf spill have been occurring yearly. Oil companies have failed to clean up their spills, often blaming sabotage by ‘rebels’ (angry villagers wanting justice and/or militia groups wanting money, many that were initially trained by the oil companies).  In the case of the recent court case that the Ogoni people in the Niger delta region won, it is estimated that the environmental impact is so large that it would take years to clean up. In an ocean, spills can spread for miles but it may only take one such spill to cover Lake Malawi with oil. One spill could potentially end aquatic life and livelihood for people that depend on the lake for generations to come. It will also mean the death to the lake-based tourism industry that is supposed to be one of the catalysts for Malawi’s development goals.

Although the continent is likely to attract $50 billion in investment in the oil sector alone by the end of the decade, Oil does not necessarily mean prosperity and development across Africa. Profit Sharing Agreements that are signed between governments and oil companies often mean that the oil company provides the capital and pays the government back only when they have recouped their costs. Often, crude oil is pumped out of the country and refined elsewhere as an export. Since there are no refineries in Malawi, Malawi would need to buy back its own oil at a premium such a situation would not resolve our fuel crisis. Rather it is reminiscent of colonial systems of mercantilism and extraction.  Oil companies have had years of experience in developing extractive practices that lead to underdevelopment in Africa – they have the resources, capital and lawyers to take on many poorer African governments or local bodies. There has been little or no development in the oil rich Niger-Delta region. The Niger-Delta is one of the poorest in the world since oil money doesn’t trickle down to the region.  In Gabon, oil has lead to mass importation of costly foreign foods at the expense and/or neglect of local agricultural industries. Most of these imported goods are too pricey for ordinary Gabonese to benefit from them even though the country can afford to import them – again, it is the poor that lose out. Thus a young democracy like Malawi would need to have above average governance in African terms to manage this resource. African countries have failed to manage resources in a way that benefits trickle down to the poor people due to internal and external factors. Malawi’s institutions would need to be mature enough to withstand global forces of globalization, neo-colonialism and western hegemony in order to prosper from oil money. 

Lastly, it should be noted that where there has been oil in Africa, there has been conflict or ‘blood oil’. This brings us to the last color- Red. The red blood of Africans has been shed continent wide over this resource. This includes on-going instability in Nigeria, Angola, and Sudan. It includes countries like Libya and Uganda where oil/oil exploration created environments conducive to government systems of central control. Malawian institutions would also need to be strong enough to withstand these internal forces. The amount of resources and wealth that oil brings makes for a good breeding ground for greedy dictatorships and militarism to rise within a government. Oil has the ability to turn politicians into oil mongers. Control of Oil may be a catalyst for future power struggles and war in peaceful Malawi. The Late President Kamuzu Banda, who ironically was a dictator, intentionally did not allow drilling on the shores of the lake because he knew it would bring instability to his government and to the country. Whether he did this purely to secure his own leadership or for the greater good of the country is debatable. Nonetheless oil exploration needs to be closely examined in 'Red, Black and Green'. . It’s important that the country looks at experiences of their neighbors and not repeat their mistakes so that Malawi’s fuel crisis doesn’t become an outright oil crisis.

-- A version of this article entitled, "Malawi's Potential 'Curse of Oil' " appeared in the opinoin column My Turn in the Malawi newspaper, The Nation on August 15th, 2011 - Ms Tinga